The Miami Herald: “Jackson Health System board votes to escrow UM payment”

Jackson Health System board votes to escrow UM payment

By John Dorschner

Fed up with the slowness of negotiations with the University of Miami, the board of the Jackson Health System voted unanimously Thursday to start putting $3.6 million of its monthly payments to the medical school into an escrow account until a deal gets done.

“I’m very frustrated by this whole experience,” board chairman Marcos Lapciuc said. “Unless we move, we’re in deep crap.”

The $3.6 million is 30 percent of the $11.9 million that Jackson paid UM in June.

Jackson had sought to negotiate a dramatically new agreement with UM by May 31 to reduce its expenses and make sure it was paying fair market value for services, but as that deadline approached without a deal, UM insisted on a temporary arrangement that included a monthly “transition payment” of $3.6 million if its doctors were to keep practicing at Jackson Memorial, where they provide more than 90 percent of medical services.

Jackson’s board balked for a day, then agreed to a temporary “memorandum of understanding” after Jackson’s executives promised to come up with a permanent operating agreement by the end of July. That memo meant Jackson was paying UM $27.6 million more on an annualized basis.

Chief Strategy Officer Jeffrey Crudele told the board Thursday that Jackson was making good progress on the negotiations, but “it’s a complex process” and talks were ongoing to restructure the relationship so that Jackson would “lease” or hire UM doctors in certain specialties to bolster “centers of excellence” at Jackson Memorial Hospital.

Several board members wondered what UM’s incentive was to come to a permanent deal that would mean getting less money, especially since the medical school has been struggling with its own financial problems.

Board members Joe Arriola, a former UM trustee, supported the escrow move as “just putting an incentive on the table” to spark getting a deal done.

UM spokeswoman Christine Morris said the medical school had no comment.

Jackson Chief Executive said in a prepared statement: “Jackson and UM have made incredible progress over the last few weeks, because we both believe this is a rare opportunity to completely modernize our relationship. UM has been completely cooperative, and we are proud to be working with its leaders to finalize a new agreement by Aug. 1,” which will be ready for board consideration in August.

Assistant County Attorney Valda Christian said that the escrow vote was technically done during a board strategy committee meeting and will not take effect until the board has its next formal meeting, which is Aug. 27. That means the July transition payment of $3.6 million will be made to UM.

Lapciuc’s concern with the UM relationship was one of four “very serious systemic issues” that Jackson is facing.

One was the slowness in which Jackson’s own executives move, particularly in procurement and contracts. “We need to start behaving more like a private hospital. We cannot do purchasing like a government.”

He said that Jackson also needs to move far more quickly in hiring doctors, to lessen the dependency on UM physicians, and he wants a new governance structure in which Jackson is more independent of control of the county commission.

The backdrop for Lapciuc’s comments was that Jackson, despite four months of surplus, still has huge financial troubles. Net patient revenue so far this fiscal year is $84 million below last year.

Part of the reason is that payments for Medicare patients has dropped because the federal insurer is insisting more be held temporarily for “observation” rather than be admitted to the hospital. Another reason is that there have been 8.1 percent fewer surgeries this year than last.

Chief Executive Carlos Migoya said his team was trying to find out what types of surgery were down, and why. Board members wondered whether UM doctors were seeing patients at Jackson, then arranging them to later have surgeries at the University of Miami Hospital.

Board member Michael Bileca pointed out that, despite major cost-cutting, which resulted in the layoffs of more than 900 employees, other reasons were crucial to Jackson’s financial improvement this year. Executives are projecting that the system will lose $18 million this fiscal year, which ends Sept. 30, compared to $71 million last year.

Of that $53 million swing, Bileca said, $30 million was caused by stemming the losses of the system’s health plan and another $10 million came from increased tax revenue, meaning that only $13 million was due to operational savings.